This paper presents a framework assisting managers in their decision making about introducing a service-oriented architecture (SOA). The benefits, risks and efforts associated with SOA are discussed from a business value perspective. The paper contributes to the literature by suggesting a unified foundation for the debate on the business value of SOA by proposing concrete value drivers and their interrelations.

The Service-oriented architecture (SOA) paradigm has gained momentum during the last years. Although the banking industry is often mentioned as an early adaptor of service-oriented technologies, there is still a lack of knowledge concerning the requirements of banks towards an IT architecture and if a SOA is suited to meet them. In this paper, we present results from an empirical study which quantifies the qualification of service-oriented technologies for the German banking industry. Using data from 52 German banks, it turns out that SOA is presumably suited to meet predefined needs of the German banking industry. However, there is a gap between the expectations of different groups of banks. Additionally, this paper presents the status quo of SOA adaptation in German banks.

Benchmarking Latency in Securities Trading - An In Depth View on Trading at Light Speed

In: Pre-Conference Proceedings of the 1st Special Focus Symposium on Market Microstructure: From Orders to Prices – Best Execution in the Age of Algo Trading and Event Stream Processing, 1st International Conference on Advances and Systems Research; Zadar, Croatia

One might think that the success of a financial investment can be measured easily as performance, defined as the return-on-investment between two points in time. However, the accurate calculation can be complex and compute-intensive, e.g., for a single customer but especially
for the entire customer base of large institutions like banks. In
order to meet these computational demands, grid computing presents
a secure, reliable and scalable technology to provide shared access to
heterogeneous resources. This research-in-progress paper introduces a service-oriented architecture for portfolio performance measurement that is based on a grid layer. It first emphasizes the importance of performance measurement as success measure and steering tool before the calculation is presented in detail. Since the consolidation of required data is very compute-intensive, different
calculation methods are encapsulated. Finally, a service-oriented grid architecture for performance measurement is presented and evaluated using criteria from system engineering and design science.

In: Proceedings of the Special Interest Group on IT Project Management pre-ICIS Workshop; Montreal, Canada

Category: Proceedings

Abstract

Project management is still a problematic area in the IS field. One source of concern is that of project escalation, a continued commitment of resources to a failing course of action. One explanation for escalation is the deaf effect response to bad news reporting (when a decision maker doesn’t hear, ignores or discounts a report of bad news). This research extends existing prior work by adding the effects of societal collectivism to the existing model proposed by Cuellar, Keil and Johnson (2006; 2007). In addition, this research examines a model of societal culture influence on individual decision making behavior based on Straub, Loch, Evaristo, Karahanna, & Srite (2002). It also explores the use of the GLOBE cultural values frame in IS research and the Ford, Connelly, Meister (2003) approach to using the cultural values frameworks in a research setting. This research develops hypotheses regarding the effect of societal collectivism on the deaf effect. The expanded model and associated hypotheses will be tested using matching laboratory experiments conducted in the U.S., Germany, China, South Africa and Saudi Arabia. We expect to show how the deaf effect is influenced by differences in societal collectivism.
At this point, data collection has been completed in all geographies except Saudi Arabia. Data from the USA, South Africa and Germany have been coded. Data from China are in the process of being coded. We are now beginning to analyze the data. At the time of presentation, we will be able to present the preliminary findings of our study. We will discuss how the response to bad news reporting is affected by societal collectivism. We will also demonstrate how the GLOBE cultural values framework can be used in IS cross-cultural research.

In: Pre-Conference Proceedings of the 1st Special Focus Symposium on Market Microstructure: From Orders to Prices – Best Execution in the Age of Algo Trading and Event Stream Processing, 1st International Conference on Advances and Systems Research; Zadar, Croatia

Purpose of this paper
The goal of this paper is to identify core IT value drivers in firms and to
model them as an IT production function to help disclose and measure the IT
value creation process and to guide managers in seeking adequate ways of employing
the IT resource.

Design/methodology/approach
Based on a critical review of the literature on the resource-based view, an
IT value framework based on the constructs IT capability, resource, and routine
is developed and then formalized as an IT production function.

Findings
Organizational routines are decisive for turning firm resources into an IT capability
and in turn into better business process performance. We show how the IT value
creation process in general and routines in particular can be measured and formalized.

Practical implications
As the interaction between IT and business units is crucial for IT value generation,
or-ganizational routines provide for important knowledge flows that turn firm
resources into value generating capabilities. We propose a concrete method to
measure and evaluate these routines and thereby contribute to making the IT
resource controllable.

What is original/value of
paper
Our main contribution is the identification and analytical formalization of
the role of rou-tines for IT value creation. We show how insights from the resource-based
view, micro-economic theory (Cobb-Douglas/CES production function), and Granovetter's
strength of ties argument can be used to describe, measure, and guide IT value
creation and to develop an IT production function.

The financial service industry is one among other industries that request increasingly the use of Grid technology for their intensive computing demand. An achievable way to accelerate the sharing of Grid resources within this sector is the establishment of a pricing mechanism. To strengthen this theory, a simulation with different pricing scenarios has been set up with the indication that price-based allocation of Grid-resources combined with an auction mechanism can lead to a cost reduction of more than 40%. This result
shows that there is a huge cost reduction potential in the financial services industry.

The interactive nature of the Internet promotes collaborative business models (e.g. auctions) and facilitates information sharing via social networks. The Name-Your-Own-Price (NYOP) mechanism is such a collaborative business model where prospective buyers bid for a specific product against an unrevealed threshold price set by the seller. Prospective buyers have strong incentives to learn more about the secret threshold price in NYOP markets, thereby relying on their own network of friends or digital networks of users with similar interest and information needs. This has led to the development of communities sharing the latest experience with bids on products in these markets. Information sharing in digital environments, both person-to-person or via communities can change bidding behavior and can thus have a strong impact on seller profit. However, previous research has so far neglected information diffusion in NYOP markets. The goal of this paper is to determine the impact of information diffusion on bidding behavior and seller profit in NYOP markets for different communication structures in social networks. Thereby, we first develop a normative model for the effect of shared information on bidding behavior. We then empirically test the validity of our model to represent actual behavior in a laboratory experiment with induced valuations. We determine the effect of information diffusion on seller profit for various structures of communication links in social networks via an agent-based simulation. Finally, we test the impact of information diffusion on bidding behavior and seller profit in a field setting with real purchases.

An Empirical Comparison of Different Methods to Estimate Willingness-to-Pay Functions

In: Marketing Science Conference 2007; Singapore

Category: Proceedings

Abstract

In recent years nonlinear pricing has attracted a lot of attention from academics and practitioners due to increased possibilities of its application in the growing area of service industries. In case of wireless communication, internet access or TV pay-channels providers usually offer a set of optional tariffs that consists of a usage-independent fixed fee and a marginal price. Analysis of nonlinear pricing is, however, very complex and poses many difficulties because of the interdependency between the consumption level and marginal price. Willingness-to-pay functions account for this interdependency and can be used to predict consumer behavior, analyze the effect of price changes on the market as well as to design of the optimal nonlinear pricing scheme. So far, several studies made proposals on how to use survey data to estimate willingness-to-pay functions (Iyengar et al. 2006, Wolk and Skiera 2006). While those studies laid down the foundations for using survey data to estimate willingness-to-pay functions, they suffer from a limited comparison of data gathering and estimation procedures. In this study we review, enhance and compare various methods that use survey data for the estimation of willingness-to-pay functions. First, we focus on the data gathering procedure (i.e., ranking-based conjoint, choice-based conjoint, and contingent valuation) while in the second step we analyze various estimation procedures (i.e., one-step versus two-step procedures). In an empirical study we measure the perceived task difficulty, the time required for accomplishing the task, face, internal and predictive validity. Based on the results we provide recommendations concerning the most reliable and valid procedure for using survey data to estimate willingness-to-pay functions.

The application of Grid technology is finally spreading
from engineering and natural science-related industrial sectors
to other industries with computational demanding applications.
The financial service industry is one of these sectors,
however, the diffusion of Grid technology within this sector is
often hindered by missing incentives to share the computational
resources. A promising way to overcome these barriers is the
introduction of a pricing mechanism for the use of Grid-based
resources. This work introduces a possible application of such
a pricing approach and provides some simulation scenarios to
illustrate how effective such an economized Grid solution can
be. The simulation results indicate that pooling of IT resources
can provide a cost reduction of 33% compared to individual
and dedicated servers. However, with a price-based allocation
of computing resources, further 10% of cost reduction can be
achieved by introducing an auction mechanism. Therefore we
claim that there is huge cost reduction potential in the financial
service industry beyond the savings that can be achieved by
a utility-based allocation of compute resources, if economically
inspired allocation methods are combined with advanced refining
and learning methods in the allocation process.

Numerous studies on behavioral finance and household portfolios show that individual investors are suffering welfare costs for their investment mistakes. However, a crucial component of their investment process has not yet been covered in the literature: financial advice.
We normatively introduce this missing link between investors and their portfolios arguing that financial advice can have significant influence on their investment decisions and reduce ensuing costs. We shed light on the environment financial advice takes place in with regards to institutional settings as well as rationales of advisors and customers. Furthermore, we present suitable means to measure the effect of financial advice. Based on these findings, we develop a research framework, derive promising questions for future studies and formulate hypotheses on interrelations between influencing factors.

Alignment and IT flexibility have been found to be crucial for a firm’s long-term success in many indus-tries. This paper investigates how alignment and flexibility are interrelated at an operational level. Based on a survey with Germany’s Top 1,000 banks we show on a business process level that shared knowledge and mutual understanding (as dimensions of alignment) between IT unit and business department have a positive impact on IT flexibility. On the other hand, higher degrees of communication between business and IT units do not correlate with higher IT flexibility.

Although Service-orientation is based on known concepts like autonomy and loose coupling of software components, the standardization of Web Service technologies has led to a rising adaptation of service-orientation in the research community as well as in the software industry over the past years. While Ser-vice-oriented architectures (SOA) are widely accepted as a new enterprise systems architecture paradigm, the current impact of the SOA paradigm on certain industries (including the German Banking Industry) has not been surveyed yet in detail. This paper describes a survey we conducted among business/IT architects from Germany’s 1020 largest banks. The subject of this survey was to identify if SOA is regarded as a ma-jor trend or as hype. Thus, we propose nine hypotheses from three areas regarding the impact of SOA on the German Banking Industry which are the foundation for the questionnaire used in the survey. Further-more, we present intermediary results from our survey and briefly present preliminary conclusions from the available data.

The literature has shown that relationship management between and within different entities is crucial in manifold contexts. Particularly, the relationship on an interpersonal level is underrepresented in research. Based on IT business alignment and outsourcing relationship literature, I aim to identify a sound construct of interpersonal relationship quality as well as its drivers and inhibitors. This model should be applied in an intra-organizational context (alignment between business and IT units) as well as in an inter-organizational context (relationship between customer and vendor in an outsourcing relationship).

The literature has shown that relationship management between and within different entities is crucial in manifold contexts. The prominent IS research strands of IT business alignment and outsourcing relationships tackle this topic from different perspectives. We argue that there are strong overlaps of these concepts and claim for a consolidation of both research strands. We match both research stream´s measurement constructs, show the overlap as well as the remainder and propose a unified model. This model consists of six dimensions and allows for a combined measurement of relationships between business and IT units within as well as across organizational boundaries.

Implementing and evaluating the Common Information Model in a relational and RDF-based Database

In: ITEE 2007 - Third International ICSC Symposium; Oldenburg

Category: Proceedings

Abstract

During the last decade, the Common Information Model (CIM) has evolved to an extensive ontology for the domain of energy markets. As the CIM does only offer an UML model for the implementation of its ob-jects, an ER model or relational database schema has not been released. Therefore, it is necessary to create a CIM based database schema in order to persist CIM data in a relational database. This schema could either be constructed based on the former mentioned UML model as a relational da-tabase schema or based on an already existing RDF/XML serialization of CIM as an RDF database. This paper evaluates these two implementations of the CIM.

The automation of business processes by the use of paper-free EDI transmissions between business partners can be an incentive to advance the exchange of orders, invoices, and customer complaints without human interruptions by integrating and embedding trust mechanisms. This paper analyzes the applicability of automatically updated trust accounts for customer relationship management for the handling of customer complaints. The model introduced in this paper can help to reduce handling and shipping costs significantly and thereby improves customer benefits, resulting in higher customer loyalty.

The objective of this paper is to propose a method for evaluating customer management implementations
in order to allow the development of an efficient and effective customer management
in retail banking with respect to the value of the customer base.
Therefore, a reference process for customer management within retail banking is derived and
by using decision calculus method, experts can evaluate the effect of activities to close the
gap between the individual company performance and the reference process. All effects are
measured in five core customer metrics (number of customers, Retention Rate, Retention expenditures,
Acquisition expenditures, cash flow) and aggregated to customer equity, allowing
a clear recommendation on certain activities.
An empirical study is conducted to back test the reference process and evaluate the actual
status of customer management implementation.

This paper tackles the question of whether the risks inherent in Business Process Outsourcing (BPO) differ significantly from the risks of Information Technology Outsourcing (ITO) and subsequently investigates which are the most salient risks inherent in BPO. By applying structured expert interviews and a quantitative survey among Germany's 200 largest banks, it turns out that the risk categories relevant to ITO and BPO are fundamentally the same, but differ in magnitude. Digging deeper into the risks associated with BPO, and using Perceived Risk Theory as a theoretical framework, we found that financial risks are most important to decision makers, followed by strategic and performance risks.

Outsourcing is a widely accepted option in strategic management, which, like every business venture, bears op-portunities and risks. Supplementing the popular area of research on the merits of outsourcing, this paper exam-ines how stockholders rate corporate sourcing decisions with regard to the risk they associate with this transac-tion. Using event study methodology and multivariate cross-sectional OLS-regression, we analyze a sample of 182 outsourcing transactions in the global financial services industry between 1998 and 2004 in order to inves-tigate the risk-specific drivers of excess returns to shareholders. The analysis studies the impact of risk-specific independent variables, including transaction size, length, outsourced business functionality, and experience with outsourcing. Our findings indicate that risk-mitigating strategies have significant explanatory power, indicating that the capital market's reaction to an outsourcing announcement might at least partly be forecast. Results show a positive correlation between market reaction and business process outsourcing by financial services compa-nies. We also find strong evidence indicating that capital markets react positively to relatively large transactions compared to the market capitalization of the outsourcing firm. For service providers our results show that tradi-tional IT-related sourcing projects or the insourcing of administrative processes have a significant positive cor-relation with market reaction.

The literature suggests that the success of an information system among others depends on its utilization. In this paper, we argue that operational IT business alignment is an important driver of system usage and thereby of the market success of the supported business process.

Using an embedded case study in four branches, the back office, and the IT department of a retail bank, many findings of the recent alignment literature can be supported. Using a strict business process perspective, we also offer new insights by showing that alignment is important for IS success in operations as well and positively influences post-implementation IS usage. In particular, mutual understanding between the units and shared domain knowledge not only between IT and business but also between different business units supported by the same core IS turned out to be very important factors of IS usage that have so far been neglected.

This paper has been awarded as the "Best Young Researcher Award" in the conference: What is the influence of outsourcing risks on outsourcing benefits? Although outsourcing literature reveals findings on outsourcing risks and outsourcing benefits, their interplay has hardly been analyzed. Using data from 218 German banking managers within the context of Business Process Outsourcing (BPO), it turns out that financial and performance related risks and benefits heavily interplay. In addition, strategic considerations such as the concentration on core business and the ability to react to market changes have substantial impact on the perception of financial and performance risks and benefits. The findings of this paper can be used to analyze effective risk mitigation instruments and to design risk measurement models incorporating risk and benefit correlations.

Are standardized business processes less risky to outsource? Despite the importance of both areas, neither the outsourcing nor standardization literature has so far offered a conclusive picture of the value of standards to outsourcing. We aim to provide an exploratory first step by suggesting that process standards have a positive impact on business process outsourcing (BPO) risk.

Theoretically drawing from perceived risk theory and the theory of reasoned action we develop a model of BPO risk and empirically show that indeed risk perception is higher for less standardized processes. Using data from 126 German banks, it turns out that financial and performance risks of BPO significantly differ between high- and low-standardized processes and are consistently higher for less standardized processes. While this work is very exploratory and the findings are quite preliminary, they are very encouraging as they indicate promising further research into the value of standards for business processes and outsourcing.

Evaluating channel performance is crucial for actively managing multiple sales channels, and requires understanding the customers’ channel preferences. Two key components of channel performance are (i) the existing customers’ intrinsic loyalty to a particular channel and (ii) the channel's ability to attract switching customers. We apply the Colombo and Morrison (Colombo, R., Morrison, D., 1989. A brand switching model with implications for marketing strategies. Marketing Science 8, 89–99) model to assess channel performance along these dimensions. Using data from a large home-shopping company, we analyze the evolution in the performance of its main channels over time, and test for differences in channel performance among different product categories offered by the company, as well as between different customer segments. Based on the results, we derive implications for managers to operate a company's multiple sales channels more effectively.